Case Analysis

Strategic Excellence at Microsoft

Microsoft is the worlds most successful software company. The company was founded by Bill Gates and Paul Allen in 1975 with the original mission of having a computer on every desk and in every home, running Microsoft software. Since then, Microsoft has grown to become the third most valuable brand in the world through strategic marketing and aggressive growth tactics.

Microsofts first significant success occurred in the early 1980s with the creation of the DOS operating system for IBM computers. The company used this initial success with IBM to sell software to other manufacturers, quickly making Microsoft a major player in the industry. Initial advertising efforts focused on communicating the companys range of products from DOS to the launch of Excel and Windowsall under a unified Microsoft look. Microsoft went public in 1986 and grew tremendously over the next decade as the Windows operating system and Microsoft Office took off. In 1990, Microsoft launched a completely revamped version of its operating system and named it Windows 3.0. Windows 3.0 offered an improved set of Windows icons and applications like File Manager and Program Manager that are still used today. It was an instant success; Microsoft sold more than 10 million copies of the software within two yearsa phenomenon in those days. In addition, Windows 3.0 became the first operating system to be preinstalled on certain PCs, marking a major milestone in the industry and for Microsoft.

Throughout the 1990s, Microsofts communication efforts convinced businesses that its software was not only the best choice for business but also that it needed to be upgraded frequently. Microsoft spent millions of dollars in magazine advertising and received endorsements from the top computer magazines in the industry, making Microsoft Windows and Office the must-have software of its time. Microsoft successfully launched Windows 95 in 1995 and Windows 98 in 1998, using the slogan, Where Do You Want to Go Today? The slogan didnt push individual products but rather the company itself, which could help empower companies and consumers alike. During the late 1990s, Microsoft entered the notorious browser wars as companies struggled to find their place during the Internet boom. In 1995, Netscape launched its Navigator browser over the Internet. Realizing what a good product Netscape had, Microsoft launched the first version of its own browser, Internet Explorer, later that same year. By 1997, Netscape held a 72 percent share and Explorer an 18 percent share. Five years later, however, Netscapes share had fallen to 4 percent.

During those five years, Microsoft took three major steps to overtake the competition. First, it bundled Internet Explorer with its Office product, which included Excel, Word, and PowerPoint. Automatically, consumers who wanted MS Office became Explorer users as well. Second, Microsoft partnered with AOL, which opened the doors to 5 million new consumers almost overnight. And, finally, Microsoft used its deep pockets to ensure that Internet Explorer was available free, essentially cutting off Netscapes air supply. These efforts, however, were not without controversy. Microsoft faced antitrust charges in 1998 and numerous lawsuits based on its marketing tactics, and some perceived that it was monopolizing the industry. Charges aside, the companys stock took off, peaking in 1999 at $60 per share. Microsoft released Windows 2000 in 2000 and Windows XP in 2001. It also launched Xbox in 2001, marking the companys entrance into the multibillion-dollar gaming industry.

Over the next several years, Microsofts stock price dipped by over $40 a share as consumers waited for the next operating system and Apple made a significant comeback with several new Mac computers, the iPod, the iPhone, and iTunes. Microsoft launched the Vista operating system in 2007 to great expectations; however, it was plagued with bugs and problems. As the recession worsened in 2008, the company found itself in a bind. Its brand image was tarnished from years of Apples successful Get a Mac campaign, a series of commercials that featured a smart, creative, easygoing Mac character alongside a geeky, virus-prone, uptight PC character. In addition, consumers and analysts continued to slam Vista for its poor performance. In response, Microsoft created a campaign entitled Windows. Life Without Walls to help turn its image around. The company focused on how cost effective computers with its software were, a message that resonated well in the recession. It launched a series of commercials boasting Im a PC that began with a Microsoft employee (looking very similar to the PC character from the Apple ads) stating, Hello, Im a PC and Ive been made into a stereotype. The commercials, which highlighted a wide variety of individuals who prided themselves on being PC owners, helped improve employee morale and customer loyalty. Microsoft opened a handful of retail storessimilar to Apple storesin 2009. The purpose of opening these stores is to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy, Microsoft said in a statement.

Today, the company offers a wide range of software and home entertainment products. In the ongoing browser wars, Internet Explorer holds a 66 percent market

share compared to Firefoxs 22 percent and Safaris 8 percent. In 2009, Microsoft launched a new search engine called Bing, which challenges Googles dominant position in the marketplace and claims to give better search results. Microsofts most profitable products continue to be Microsoft Windows and Microsoft Office, which bring in approximately 90 percent of the companys $60 billion in revenue.

Q1 - Examine the significance of competitive differentiation. As one of its competitive strategy to compete with Apple elucidate if Microsoft doing a good thing by acknowledging Apples campaign in its own marketing message.